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00:00LET ' S LOOK AT SOME OF THE RELAXATION WE HAVE HAD SO FAR FROM REGULATORS. WE HAVE NEW VIDEOGAMES APPROVALS, THE BAN FOR U.S. DD-LISTING IS GONE. HOW FAR ARE WE FROM THINGS BECOMING BETTER? ANGELA: THESE ARE CLEAR SIGNS THAT REGULATION IS EASING. SINCE MARCH OF THIS YEAR, WE HAVE HAD A LOT OF POSITIVE NEWS. THE VICE PREMIER CONVENED A MEETING WHERE HE EMPHASIZED THAT REGULATORY AUTHORITIES NEED TO BETTER COORDINATE WITH THE FINANCIAL DEPARTMENTS BEFORE TAKING REGULATORY ACTIONS THAT ARE EXPECTED TO HAVE AN IMPACT ON THE MARKET. FROM MY READING, THAT IS A VERY CLEAR SIGN OF REVELATORY EASING. IT SHOWS THAT REGULATORS NEED TO RETURN TO THEIR ROUTINE ENFORCEMENT RATHER THAN CONTINUING WITH THE LAW ENFORCEMENT CAMPAIGN. BUT I THINK THEY WERE CAUTIOUS EARLIER, INVESTORS, BECAUSE THEY WERE LOOKING FOR MORE CONCRETE ACTIONS. WE FINALLY GOT THAT LAST WEEK. THE FIRST VIDEOGAME TO BE APPROVED, AND THEN RUMORS THAT THE DIDI PROBE WAS ENDING SOON. PAUL: LET ' S TALK ABOUT THE POTENTIAL REVIVAL OF THE ANT INITIAL PUBLIC OFFERING, HOW LIKELY IS THAT A? ANGELA: I THINK IT IS LIKELY TO HAPPEN. CHINESE COMPANIES TO IMPROVE WESTERN -- THEY WANT TO IMPROVE SENTIMENT AND BOOST THE MARKET AT THE MOMENT. BEAR IN MIND, THE REGULATION IS AN IMPORTANT LEVEL FOR THE CHINESE GOVERNMENT TO MANAGE ITS ECONOMY ON TOP OF THE FISCAL AND MONETARY POLICY THAT PEOPLE OFTEN TALK ABOUT. AND WE HAVE HEARD A LOT FROM EXPERTS SAYING THAT IT IS NEARLY IMPOSSIBLE FOR CHINA TO ACHIEVE ITS 5.5 PERCENT GROWTH TARGET THIS YEAR. HOWEVER, THEY MAY HAVE UNDERESTIMATED THE POTENTIAL IMPACT OF REGULATION. IN THIS CASE, IT IS THE REGULATION THAT COULD BE USED TO REVIVE THE ECONOMY. SHERY: WHAT ABOUT THE POTENTIAL OF A GOLDEN SHARING. WE HAVE HEARD TALK ABOUT THAT. WHAT WOULD THE IMPACT BE ON VALUATIONS WERE THAT TO HAPPEN? ANGELA: THAT IS A GREAT QUESTION. I DON ' T KNOW TO WHAT EXTENT IT MIGHT AFFECT A FIRM ' S VALUATIONS. SO FAR, THERE ARE REPORTS THAT BYTEDANCE AND OTHERS HAVE THIS KIND OF SHARE ARRANGEMENT. ALTHOUGH IT REMAINS TO BE SEEN WHETHER THE CHINESE GOVERNMENT WILL TAKE A SIMILAR ARRANGEMENT IN SOME OF THE LARGEST TECH FIRMS. WE ARE TALKING ABOUT DIDI, TENCENT, ALIBABA, ET CETERA. YOU CAN SEE IT ON BOTH ENDS. ON THE ONE HAND, HAVING A GOVERNMENT REPRESENTATIVE ON THE BOARD OF DIRECTORS OF THESE COMPANIES MIGHT FACILITATE COMMUNICATIONS BETWEEN THE FIRM AND THE REGULATOR. ONE EXAMPLE THAT PEOPLE WOULD THINK OF IS THE DIDI SAMPLE. WE HAD DIDI HEED THE ADVICE OF ITS REGULATOR AND HELD UP ITS IPO IN JULY. IT WOULD NOT HAVE RESULTED IN SUCH NEGATIVE CONSEQUENCES AFTERWARDS. SHERY: SO ALL OF THESE REGULATORY CHALLENGES WE HAVE SEEN, WHAT HAS BEEN THE FUNDAMENTAL CHANGE WE HAVE SEEN FROM THE CRACKDOWN IN THE PAST FEW YEARS IN BEIJING? ANGELA: THIS CRACKDOWN HELD IN VERY SIGNIFICANT INSTITUTIONAL CHANGES THAT ARE GOING TO BE LONG LASTING. FIRST IS THE LAWS PROMULGATED, NEW LAWS LIKE PERSONAL INFORMATION PROTECTION LAWS, THE DATA SECURITY LAWS. REAL TEETH. SECOND, THERE ARE A FEW VERY CHILLY PRECEDENTS THAT WERE SET BY REGULATORS. THE FINDINGS THAT WERE IMPOSED ON ALIBABA AND MEET ONE AS WELL AS THE CYBERSECURITY CHECK INTO DIDI. THEY WILL MAKE TECH FIRMS TAKE LEGAL COMPLIANCE VERY SERIOUSLY SO THAT WILL DEFINITELY CHANGE THEIR BUSINESS PRACTICES. ALTHOUGH TO WHAT EXTENT THAT WILL AFFECT THEIR BUSINESS FUNDAMENTALS REMAINS TO BE SEEN. LASTLY, REGULATORS ' CAPACITY HAS BEEN ELEVATED. THE CHINESE ANTITRUST AUTHORITY HAS BEEN ITS BUDGET DRAMATICALLY EXPANDED. SO THESE KINDS OF CHANGES WILL HAVE FAR-REACHING IMPACT ON FUTURE TECH REGULATION IN CHINA. SHERY: COULD THIS MEAN THAT WE COULD SEE SOME MEANINGFUL UPSIDE FOR CHINESE TECH STOCKS? OR HAVE MARKETS PRICED IN THIS EASING OF THE REGULATORY LANDSCAPE? ANGELA: GOOD QUESTION. I PREDICT THAT FOR THE NEXT SIX MONTHS, BECAUSE OF POLICY, WE HAVE CLEARLY SHIFTED AND I THINK REGULATORS WILL GIVE THESE FIRMS IN A REPRIEVE IN THE SHORT-TERM AS THEY RETURN TO THEIR REGULAR ROUTINE ENFORCEMENT. YOU WILL NOT BE EXPECTING A VERY HIGH-PROFILE INVESTIGATION OR A KIND OF SUDDEN ANNOUNCEMENT AND SURPRISE INSPECTION IN THE NEXT SIX MONTHS. HOWEVER, IN THAT MEDIUM AND LONGER-TERM, I EXPECT REGULATION TO TIGHTEN. AND THAT IS CERTAINLY NOT UNIQUE TO CHINA, WE HAVE SEEN THIS DYNAMIC IN OTHER JURISDICTIONS. I EXPECT QUITE SWEEPING REGULATORY CHANGES TO THE WHOLE REGULATION LANDSCAPE IN THE COMING YEARS. THAT IS WHAT IS HAPPENING IN EUROPE AND IN THE UNITED STATES. IT WILL HAVE AN IMPACT.

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HKU's Zhang on China's Tech Sector

Angela Zhang, Ddirector at Centre for Chinese Law at the University of Hong Kong, discusses the outlook for China's tech sector as the country is showing signs of easing its crackdown. She speaks with Blooomberg's Paul Allen and Shery Ahn on "Bloomberg Daybreak: Asia." (Source: Bloomberg)

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